Designing the Future Forum

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Broadband Why dont we get it?
City of Whittlesea Brad Wynter Organisation
Support Executive
Designing the Future Forum Internet Society of
Australia 3 December 2002Maddocks - Melbourne
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City of Whittlesea

• Interface municipality
• 2002 population approx. 120,000
• 54 non English speaking background
• Area 490 sq kms
• 35,000 homes
• 3,600 businesses
• Culture of Innovation8 National Innovation
  Awardsover past 3 years

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Agenda
1) Current Australian situation 2) International
approaches 3) Australia - what next? 4)
Paradigm shifts needed 5) Different Business
Models 6) WIRED Development
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Current industry landscape

• Telephony Data and Video are on different
  infrastructure platforms
• Proprietary services are bundled with
  proprietary infrastructure
• Broad range of video services requires multiple
  sets of infrastructure in the home

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Current industry landscape

• CATCH 22
• Lack of broadband infrastructure to the home due
  to
• Lack of consumer demand due to
• Lack of awareness and relevant content due to
• Content developers not developing new content due
  to
• Difficulties in accessing publishing channels due
  to
• Lack of high bandwidth infrastructure to the home
  and proprietary bundling of services to
  infrastructure.

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The five vendor choices
1)Telecommunication Carriers 2)PayTV
providers 3)Government/Public Utilities 4)Housin
g Developers 5)Community Organisations
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US advanced network growth

• FTTH Council
• NEW ORLEANS October 15, 2002 According to a
  new study released during the Fiber-to-the-Home
  (FTTH) Conference 2002, the first annual
  conference hosted by the FTTH Council, FTTH
  installations are expected to leap by 330
• in 2003 from 72,100 homes passed to 315,000 homes
  passed, ultimately reaching between 800,000 and
  1.4 million homes by 2004. The study, entitled
  Fiber to the Home and Optical Broadband 2002,
  builds on an earlier report on FTTH
  installations released in August that showed a
  2002 growth rate of more than 200 percent.
• Approx 50 Developers,
• 50 Public Utilities/Gov/Community Orgs

8
Taunton Broadband Project

• 1998
• School network
• Hospital
• 2002
• 3,400 dial up ISP
• 50 broadband market

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Taunton Broadband Project

• Trial
• July - Dec 2002
• 120 subscribers
• Cost Recovery
• 20-30 years (fibre)
• 2-5 years (equipment)

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Taunton Broadband Project
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Taunton Broadband ProjectLearning

• If telcos and PayTV dont provide advanced
  network infrastructure then public utilities
  Local Government or community agencies will
• Prepared for long periods before recovering costs
• Often higher takeup because they are local
  organisations

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US broadband industry significant differences
Consumer awareness Big market Culture of
paying for TV Availablility of services and
content choices
Ready demand Opportunities for niches Ready
video market Small networks can get broad
range of content and services
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Australian broadband factors
Low Consumer awareness Small market Good
quality free to air TV Limited availability
of services and content choices
Small demand for broadband services Small
scale niches Video market slowly developing
Small networks cannot get broad range of
content and services
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Who pays?
South Korea - Gov/Private investment AUS 15
billion 1998-2002 Gov/Private investment AUS 18
billion 2002-2005 Canada - Gov/Private
investment AUS 2.7-4.5 billion
2000-2004 Sweden - Government investment AUS
1.69 billion 2001-2004 US - Central Gov
investment AUS 350 million 2001-2003 Major
investment by developers and Public
Utilities. Sources - BROADBAND SNAPSHOT TAKE-UP
OF BROADBAND SERVICES IN AUSTRALIA September 2001
DCITA BBC News Wednesday 6 November 2002
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Who pays?
Source - BBC News Wednesday 6 November 2002
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Korea

• KT Corp.
• Invested 2 billion since 1999 into hi-speed
  broadband infrastructure web-surfing
  technologies
• Result attracted Microsofts (500 US million
  investment) to develop home-networking systems,
  e-schooling and other broadband initiatives.

• Koreans now have 4x the number of broadband
  connections than the U.S. (Similarly, Canada has
  2x the number of connections than the U.S.)

• Originally, KT Corps CEO, Lee Sang Chul, claimed
  that the more subscribers we attracted to our
  broadband services, the bigger losses we had.
• TodayOur broadband network is a key money maker
  Business Week, Asian Edition, March 18, 2002

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Crystal Ball for Australia

• Consumer awareness will increase
• Demand for a broad range of services will
  increase
• Telstra and other carriers will respond with
  interim technologies but only in profitable
  areas
• Non profitable areas will look for other
  infrastructure solutions
• Public Utilities/Government and developers will
  establish niche networks
• Small scale niche networks will struggle to
  attract a broad range of content and services
• Limited potential to deliver good outcomes to
  local communities and develop a healthy
  sustainable industry

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Awareness
Source - Telstra presentation at the 2002 ATUG
annual confuracne in Melbourne
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Paradigm shifts required to deliver advanced
networks
PARADIGM SHIFT Natural Monopoly in Local
Loop Open Network Alternative models and
financing mechanisms
WHY? Benefits of competition in local loop
infrastructure will not outweigh the capex
costs of duplicating the local loop
infrastructure Consumers want full range of
services Competition on services side will keep
prices competitive which leads to a healthy
sustainable industry Advanced networks are
expensive to establish and the benefits are
widely dispersed between operators, government,
business and individuals
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Current electricity model

• Single infrastructure into the home
• Multiple service providers to choose from
• Unbundling of infrastructure from services

NOT
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Monopoly
Homes/Businesses
Service Providers
InfrastructureProvider
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Full competition
Homes/Businesses
Service Providers
InfrastructureProviders
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Community Hub and CAN
Homes/Businesses
Service Providers
InfrastructureProvider
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Structural Separation
Homes/Businesses
Service Providers
InfrastructureProvider
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New development area issues

• No overhead infrastructure so difficult to
  retrofit broadband solutions
• Retrofits cost at least double of putting
  conduit in at sub-division construction time
• Carriers not putting broadband infrastructure
  into new development areas (only putting in
  copper), due to cost, current lack of
  profitability in getting consumers to pay for
  several sets of infrastructure and no
  competition

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New telecommunications model

• High bandwidth infrastructure able to deliver
  telephony, data and video telecommunications
  services
• Unbundled infrastructure from services
• Consumers have choice of services and content
  without needing to install more infrastructure
• Open infrastructure for all service providers
  Available for delivering competing PayTV bundles
  simultaneously or on a pay per use basis.

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Why Growth Councils?

• Lower cost barrier to carriers with very little
  financial exposure
• Control local planning scheme and can mandate
  conduit installation in all new developments
• Greenfield development is happening in growth
  Councils
• Strategic advantage for both economic
  development and home amenity

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What can Growth Councils do?

• Choices are
• Do nothing (Your community will regret your
  decision in 3- 5 years time)
• Invest in conduit to provide the capability for
  a network provider to provide infrastructure
  and services in the future (Suggested approach)
• Invest in conduit and dark fibre and lease it
  out to all and sundry (Stokab)
• Invest in conduit, fibre and equipment and
  provide network operations for all content and
  services (UTOPIA project)

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What Whittlesea did

• Created vision for delivering broadband services
  to our community
• Researched opportunities for Council to
  facilitate broadband access
• Met with developers to explain what Council is
  aiming at
• Changed Local Planning Scheme to require
  developers to install Council owned conduit as
  part of the sub-division development process
• Developed conduit standards and guidelines for
  developers to assist installing conduit
• Initiated Council consortium of 6 Councils around
  Melbourne to duplicate process with aim of an
  EOI and RFP in 2003

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New telecommunications business model

• Developers required to install telecommunication
  conduit in the sub-division process and hand it
  over to Council
• Council leases conduit to carrier at replacement
  cost plus monitoring costs over its life
• Minimum service package of telephony, data and
  video to be met by carrier with extension of
  lease bonuses for exceeding the minimum service
  package
• The more services and content provided, the more
  companies sharing the cost of the
  infrastructure
• ROI can be calculated over the life of the
  infrastructure

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Benefits

• Maximise choice of services and content
• Minimise cost through shared infrastructure
• Potential to attract data rich industries
• Potential to utilise infrastructure to provide
  better local connections
• Potential to attract a new type home buyer

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Questions
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